The Trust comments on payday loans

​National Debtline has seen a 116 per cent increase in calls for help with payday loans from the same period last year

Commenting on the announcement of strengthened voluntary codes of practice for the payday lending industry, Joanna Elson, chief executive of the Money Advice Trust, said:

“It is vital that payday lenders, advice agencies and Government all subject the practices of this fast growing industry to strong scrutiny. We know from people calling into National Debtline (which the Money Advice Trust runs) that payday loans can have a dangerous tendency to make a bad situation significantly worse. The new measures announced today are a step in the right direction. Payday loans companies are licensed by the OFT and therefore must comply with the OFT Irresponsible Lending Guidance, something which we have found they repeatedly fail to do. It is however difficult to see where these changes to the voluntary codes of practice go beyond what is already required by the OFT.

“We have several areas of particular concern around payday loans and the new codes have done little to address these issues. Ultimately, unless a single code of practice binding on all lenders is put in place, clear protection for consumers is unlikely to be achieved. A single code should be accompanied by a robust set of sanctions for non-compliance that is enforceable against lenders and monitored by the OFT.

“It is important to recognise and applaud any moves to protect consumers from falling foul of the payday loans industry, but it is equally important to recognise that there is still a very long way to go. It is clear that far more must be done to stem the tide of payday loan problems faced by more and more people across the UK every day. In the first half of this year National Debtline received 9,500 calls for help with payday loans, 61 per cent more than the previous six months and 116 per cent more than the same six months last year. More than ten per cent of all callers in the period had a payday loan. All this makes payday loans by far the fastest growing debt problem that National Debtline deals with.”